New Bosses Often Clean House

Senior Editor

When a new chief executive moves into the C-suite, the chances are about one in four the chief financial officer will be out the door within a year.

Within two years of getting a new boss, about a third of CFOs are gone, according to Korn/Ferry International, which looked at 504 CFO departures since 2010 from 1,000 of the largest companies it tracks.

Some CFOs who have successfully navigated a CEO transition offer three main tips for survival: Communication is key; identify the new boss’s strengths and weaknesses and compensate for the latter; and don’t be sand in the gears of a new strategy.

“It’s better to err on the side of over-communication,” says Pete Nachtwey, CFO of Legg Mason Inc. “There’s so much they need to learn.”

Mr. Nachtwey says that he and Joseph Sullivan, who was named CEO in February after heading global distribution at Legg Mason and being interim CEO for about five months, “are the sole survivors of the prior executive leadership.”

Because Mr. Sullivan was an internal promotion, Mr. Nachtwey says the pair already had a good working relationship. But “we all have some strengths and weaknesses,” he adds, and the CFO’s role is “assessing key knowledge and experience gaps” to make sure the CEO’s “blind spots” are covered. “It’s more a consigliere role.”

Intel Corp. CFO Stacy Smith, who was widely reported to be in the running to take over for Paul Otellini before Chief Operating Officer Brian Krzanich was named CEO in May, says that even the best CEOs have areas where they aren’t as experienced. “The role of the CFO is to be a complement to the CEO,” Mr. Smith says.

Mr. Otellini spent much of his time as CEO selling and marketing the company’s products, so “my focus was more internal execution,” Mr. Smith says. Mr. Krzanich, though, focuses on “tech first and foremost” and is “deeply diving into engineering,” so Mr. Smith says he spends more of his time these days focusing on deals with clients.

Around a third of new CEOs are hired from outside, according to Korn/Ferry, and that can be a tougher slog for the CFO they inherit. That’s especially true when personalities clash, says Kim Christfort, global director of business chemistry at Deloitte LLP.

Of 257 CFO departures since the beginning of 2012, 52 occurred within one year of a new CEO’s arrival. Of the 16 who left after an external CEO came in, 13 were replaced by an external CFO, according to Korn/Ferry’s financial officer practice. That’s roughly double the typical 40% to 45% of all new CFOs who come from outside.

Take Sam Duncan, who was named CEO of Supervalu in February, ahead of the transformative sale of nearly 900 grocery stores. By May, the company’s former CFO was gone, and by August Mr. Duncan had installed Bruce Besanko, who was his CFO when he ran OfficeMax Inc.

“Sam and Bruce have a successful track record together,” which will help Supervalu in its efforts to improve operations, Supervalu said in a statement.

Navistar CEO Troy Clarke, who was promoted to lead the truck and engine maker in April, brought in Walter Borst last month. The duo had worked together at General Motors Co.

Jeffrey Boyer says he understands why Michael Rouleau, CEO of Tuesday Morning, hired him last week as CFO. The pair worked together at Michael Stores Inc. “There are many similarities between the Michaels Stores turnaround story from 15 years ago and the Tuesday Morning turnaround today,” added Mr. Rouleau.

Attempts to reach former CFO Stephanie Bowman were unsuccessful.

One of the survivors with an external CEO is Cheryl Beebe, who has been CFO of Ingredion Inc. since 2004.

Ilene Gordon became CEO of the company, which was then called Corn Products International, in May 2009. She recalls that “the first three months are very important” in determining which executives stay and go.

Ms. Beebe recalled that Ms. Gordon had been CEO of a large private packaging company but hadn’t had to deal with the trappings of public-company life and hedging corn prices. “You become part coach, part mentor and part supporter,” she says.

But more importantly, she adds, you have to embrace change. “If you don’t believe in the direction the boss is going, and you don’t say why, and you sit there and simmer with resentment, that’s not a good place to be,” she says. “The two spots that typically change are the CFO and the head of [human resources],” she adds. “Those are the two key lieutenants.”

Corrections & Amplifications:

An earlier version of this article incorrectly said Navistar Chief Executive Troy Clarke joined the company in April. He joined the company in 2010 and was promoted to the CEO post in April. This post has been updated to correct the error.

Comments (5 of 6)

Enjoyed your article which rings very true & quite factual. I ask that you consider the other image. CFO's at times maneuver information to oust the CEO & take over the position. I have seen this done in a very clever mode more than once. A new CEO needs to be cautious & examine those he inherits who consider themselves CEO candidates.

These are some great tips, Maxwell. Communication is key in any business role, but it is especially important when navigating through new leadership. A strong CEO and CFO team is integral to a successful business, and complementing strengths and weaknesses is one way to accomplish that.

10:23 pm September 17, 2013

Nigel wrote:

Uh! My bad. It is Mr. Smith.

10:20 pm September 17, 2013

Nigel wrote:

“The role of the CFO is to be a complement to the CEO,” Mr. Smith says

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